When President William Ruto signed the Executive Order Number 1 of 2023 in January tasking his deputy Rigathi Gachagua with spearheading reforms in the coffee and tea sub-sectors, the latter perhaps hadn’t conceptualised the full magnitude of the bruising battle that lay ahead of him.
Close to one year along the road, the campaign, which has featured prominently in almost all public engagements that Mr Gachagua has had, has translated into far-reaching unsettling effects that have significantly disrupted trading operations.
But is it a case of things getting worse before they get better? Sector players are wondering.
In his fight, the DP has been pointing to unnamed individuals whom he has branded ‘cartels’, accusing them of taking advantage of farmers by coming in between them and global consumers.
To that effect, the campaign has proposed a raft of measures that include the introduction of a direct settlement system (DSS) aimed at ensuring expedited and transparent payment of coffee sales proceeds.
The drive is also seeking to push the enactment of the Coffee Bill 2023, which proposes to reorganise the industry by transitioning the regulatory and commercial roles currently undertaken by the Agriculture and Food Authority (AFA) to the Coffee Board of Kenya.
Further, the legislative proposal also aims at transitioning the research on coffee currently undertaken by the Coffee Research Institute under the Kenya Agricultural and Livestock Research Organisation (KALRO) to the Coffee Research Institute.
Other policy documents lined up to revive the sub-sectors include the Draft Sessional Paper Number 1 of 2023 on sustainable quality coffee production for food security and wealth creation, the draft Co-operatives Bill 2023, and the Sessional Paper No. 1 of 2020 on the National Co-operative Policy.
DP Gachagua has remained bullish that he will succeed in weeding out cartels and with it, sort out the numerous challenges that have plagued the once-thriving industry for years.
“These cartels have banded together, resorting to all means, including spreading propaganda. They are trying to create an artificial crisis. That is because of changes made in the policy people have refused to buy coffee and that is pure lies. They want to force us to sell it to them,” he told a church gathering in Othaya in September.
As the government-led efforts continue to take shape, tea and coffee growers, and traders have found themselves on the receiving end on account of declined sales, and warehouses overflowing with unsold produce amid tussles on pricing and trading permits for their harvest.
For instance, in the coffee industry, the State has suspended issuance of new permits to coffee sales agents until the reforms are finalised—dealing a blow to both growers and traders.
Barely two weeks ago, Agriculture Cabinet Secretary Mithika Linturi slammed the brakes on plans by the AFA to issue direct sales permits to four firms that comprised Sustainable Management Services, Kenya Co-operative Coffee Exporters Limited, Iceberg Movers Enterprises Limited, and Coffee Management Services.
“Information has been brought to my attention on the recommendation to license the following companies as coffee direct sales agents. The purpose of this letter is to direct that you suspend this exercise until the ongoing coffee sector reforms are finalised or until otherwise advised by my office,” Linturi told AFA acting Director-General Willis Audi in a letter.
In another glaring pointer to the deterioration of activities in the sector, coffee grower Eaagads this week reported an over 99 per cent dip in sales revenue for the six months to September, standing at Sh1.1 million down from the Sh158.9 million recorded in a similar period last year.
The drop in revenue, which the firm attributed to the Gachagua-led reforms, translated into a Sh33.1 million net loss effectively reversing a Sh37.2 million net profit that was booked last year.
In October, the Cabinet approved Sh4 billion for coffee farmers in a development that was set to raise coffee prices fourfold, from Sh20 to Sh80 a kilogramme. The tea sector has also been in a slump as a stand-off over State-fixed minimum prices at the Mombasa tea auction triggered a crisis, leaving warehouses overflowing with stocks of unsold consignments.Industry estimates showed about 60 per cent of stocks sent to the weekly auction over the past six months remained unsold and in warehouses as additional larger consignments are brought in on increased output due to the heavy rains being experienced across all key growing areas.
The Kenya Tea Growers Association (KTGA), which represents the large-scale plantations, attributed the crunch to a standoff over the minimum price of $2.43(Sh372.37) per kilogramme of tea that was set by the State on Kenya Tea Development Agency (KTDA) teas in 2022 to safeguard farmers’ earnings.
“The problem is on the minimum price set by the State. Buyers do not want to buy at that price which has triggered a crisis because a lot of tea is going unsold and have to be reprinted on future sale catalogues,” KTGA chief executive officer Apollo Kiarii told Nation in an interview.
The association further stated that much of the tea is made from smallholder farmers' leaves that need to be paid. They can only be paid if Kenya tea is selling above the cost of production. About 40 per cent of smallholder West of Rift tea is unsold and many sales for other producers are below the cost of production.
“We recommend the removal of at least the West of the Rift smallholder minimum pricing. Regulate the shipment of all reprinted/unsold tea to Dubai to stop Pakistan blenders cashing in and exploiting the current situation of unsold stock,” KTGA proposed.
“Anything on or above a value of $2(Sh 306.45) sold can be shipped but properly reviewed and policed every month. Re-orientate marketing so that the millions of unsold small holder tea in stock is taken off the existing market circuit. Discount and sell to African destinations through Kenya or burn, or throw on tea fields. Once the backlog is cleared return to an orderly marketing structure,” it added.
Data by the Tea Directorate shows that cumulative tea output for the first half of 2023 rose by 2.34 million kilogrammes to 273.64 million compared with the same period of last year.